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Issues involved: Justification of addition of cash credits u/s 68 of the Income-tax Act based on loan creditors being close relatives of the assessee.
Summary: The judgment by the Kerala High Court addressed the issue of whether the Tribunal was justified in sustaining the addition of cash credits u/s 68 of the Income-tax Act. The assessee's case was that some loan creditors, who were close relatives, had confirmed transactions before the Assessing Officer, thereby proving the loan credits. However, the Tribunal rejected this claim as the loan creditors did not prove the source of funds before the Assessing Officer, apart from providing confirmation letters. The Court agreed with the Tribunal, stating that unless the close relatives of the assessee prove the source of funds, the credits claimed by them cannot be accepted. The lack of explanation regarding the source of funds affects the genuineness of the transaction, and without proof of source, the loan creditors cannot be considered to have fulfilled their duty of proving the loans were genuinely advanced to the assessee. Additionally, there was no evidence presented regarding the repayment of the loan credits, as required by Section 269(ss) of the Act, which mandates payments and repayments of loans exceeding a certain amount through account payee cheques. Since there was no proof that the loans were taken or repaid through account payee cheques, the Court found no grounds to interfere with the Tribunal's order. It was also noted that there was no scope for entertaining additional evidence at that stage of the appeal proceedings under section 260A of the Act. Consequently, the appeal was dismissed by the Court.
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